The basic structure of the commodity-linked and equity-linked is quite similar. In addition to being subdivided into "bullish", "bearish" and "hybrid" notes, special terms can be added to increase expected returns or protection level.
Commodity spot price, commodity futures contract, commodity index & fund.
Gold-linked notes and crude oil-linked note.
PrecautionsInvestors need to pay attention to if the commodity-linked note need to settle the relevant commodity at the strike price after the fixing date, and whether the settlement method can be settled in cash, or must be settled in physical method that is needed to pay for related transportation, Storage, tariffs and other expenses.
There are many types and forms of structured products. Investors should beware the following investment risks, including but not limited to:
- Credit risk: The credit risk of the issuer or guarantor of a structured product. When the issuer or guarantor goes bankrupt or fails, even if it is a principal-protected product, the investment principal will still cause losses;
- Liquidity risk: Structured products generally do not provide a secondary market. Due to the lack of a secondary market, investors cannot sell contracts before maturity. Therefore, investors can only enter into liquidation / unwinding transactions with the issuer, the price is determined by the issuer, and the transparency is low.